Singh’s Balancing Act in Tehran

Prime Minister Manmohan Singh at the inauguration ceremony of the 15th summit of the Non-Aligned Movement in Egypt, July 15, 2009.

During his four-day trip to Tehran, Indian Prime Minister Manmohan Singh will have to tread cautiously, as India tries to balance its interests in Iran with U.S. pressure to isolate the country over its nuclear program.

Mr. Singh is heading to the Iranian capital on Tuesday evening to attend the summit of the Non-Aligned Movement, a Cold War grouping of 120 nations aimed at promoting the interests of developing countries.

Since the fall of the Berlin Wall, this has been the kind of event that made few headlines.

Washington has made it clear how it feels about those attending. “We, frankly, don’t think that Iran is deserving of these high-level presences that are going there,” U.S. State Department spokeswoman Victoria Nuland said at a recent press briefing.

While she didn’t single out Mr. Singh, India is in a particularly tough spot.

The Prime Minister’s trip has placed New Delhi’s ties with Tehran under fresh scrutiny. On Wednesday, Mr. Singh is set to meet the Islamic Republic’s top rulers, Supreme Leader Ayatollah Ali Khamenei and President Mahmoud Ahmadinejad – the first meetings of this level since 2001.

Mr. Singh is expected to try to advance India’s energy and security interests by developing closer ties, but doing so without making the U.S. uncomfortable will be a challenge.

“India is not going to abandon Iran just because the U.S. wants it to,” says C. Raja Mohan, a fellow at New Delhi’s Observer Research Foundation. “But it doesn’t mean it will pick a fight with the U.S. either.”

There is a risk that India will lose its exemption from new U.S. sanctions aimed at curbing Iran’s nuclear program if it deepens ties with Tehran, argues Ashley J. Tellis, a senior associate at the Carnegie Endowment for International Peace, a Washington-based think tank. “And New Delhi understands this perfectly. Hence, it is trying to walk the tightrope condemning Iran’s evasion regarding its nuclear activities while still maintaining active diplomatic ties with Iran,” he said in an email.

Under U.S. pressure, India has cut back on oil imports from Iran, which make up around 9% of its total imports, down from last year’s 12%. Washington has praised New Delhi for reducing its oil purchases, and exempted it from new sanctions that bar foreign financial institutions that do business with Iran from accessing U.S. markets.

Since existing sanctions make it difficult for India to pay for Iranian oil in dollars, the two countries have agreed that India can make 45% of its oil payments in rupees, money Iran can use to buy Indian goods.

“We would certainly like to expand Indian exports to Iran,” India’s foreign secretary, Ranjan Mathai, told reporters ahead of the official trip. Iranian exports to India made up $13.5 billion out of the $15.9 billion in overall trade between the countries in the year ended March 31, according to government data.

But experts say that, in the long run, the barter system can’t work. Mr. Tellis of Carnegie believes that Iran is willing, for political reasons, to continue delivering oil to India even if New Delhi is having trouble paying for it because of U.S. sanctions. “Given Tehran’s isolation, the Iranian leadership figures it can compensate for the lost dollar earnings partly through barter while, more importantly, keeping India on its rapidly diminishing roster of ‘friends,’” he says.

Another priority for India is to secure, through Iran, physical access to Afghanistan, a country it considers of strategic importance for regional security.

Ahead of the expected withdrawal of U.S.-led troops by 2014, India is keen on establishing a greater presence in Afghanistan to prevent it from falling in the hands of the Taliban and regional rival Pakistan. The U.S. has actively encouraged India to pursue this policy.

On Sunday, top Indian, Iranian and Afghan officials met in Tehran to discuss the possibility of jointly building a new port in Chabahar, southern Iran, and linking it overland to Afghanistan with the aim of promoting trade and infrastructure there.

While India is determined to engage with the Islamic Republic on these issues, there likely won’t be any a announcements from Mr. Singh’s trip that would show India tilting from its middle-ground position.

“(India) will continue to walk the tightrope and show how good we are at walking the tightrope,” says Mr. Mohan.

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